Green Mountain Coffee Roasters
The company under consideration is Green Mountain Coffee Roasters (GMCR). Their website is “www.greenmountaincoffee.com”. The Company is categorised under the breweries industry (Dess, 2012).
The company was founded in 1981 as a small café in Waitsfield, Vermont. In 1993, the Company went public and during the same year it made an early investment in Keurig, and incorporated it. GMCR acquired the remainder of Keurig in 2006 and since then, it has been changing the way North America prepares its beverages both at home and in the workplace with its Keurig Single Cup Brewing System. Brian Kelly is the current president and the Chief Executive Officer. The company is recognized as a leader in specialty coffee and coffee makers. It is acknowledged for its award-winning coffee products, innovative brewing technology, and environmentally and socially responsible business practices (Dess, 2012).
Keurig products are among the most sold in the United States and the company owns the best brewing machine in the country. The company has partnership with strong brands. This means that GMCR has established partnerships with multi-channels distributors in order to increase sales and awareness of its products. The company also focuses on the consumer’s choice, quality and convenience.
This business is a seasonal one. Most sales take place in the fourth and first quarters every year. This happens because the business depends on weather conditions. However, GMCR is trying to promote its new products based on the wide variety of hot and cold beverages that they provide.
The K-cup patent expires and must be renewed. For example the last one expired in September 2012.This was detrimental to GMCR as a result of competition from generic competitors. On the other hand, 84 percent of the company’s annual sales are generated through the sales of Keurig brewers and K-Cup packs. This can prove to be detrimental because there is a heavy reliance on one product over others.
Coffee companies are highly influenced by the coffee price. The price volatility can cause an uncertainty on future supplier contracts, and thus create stiff competition to the company (Dess, 2012).
The company enjoys a strong brand and loyalty of customers, which is enhanced by customers who recommend their services to other people through word of mouth. GMCR still has a very huge customer base, some of which still remains unexploited.
Porter’s Five Forces
Threat of substitutes
High percentage of American citizens drink coffee on a daily basis. Other products and beverages such as sodas and energy drinks do not have the same consumption rate as coffee.
GMCR have lost its patent on its K-Cup packs in September 2012. This means that competitors or generic brands have the opportunity to manufacture their own versions of K-Cup packs at lower prices.
A Threat of New Entrants:
The expiration of the K-Cup pack patent will invite stiff competition from other coffee manufacturers that are not currently in the single cup brewing market. These manufacturers have similar sized or larger distribution channels that could be exploited to rapidly increase market share. New entrants to the coffee industry in general will have a more difficult time establishing those distribution networks and licensing partnerships.
The K-Cup pack patent agreement with GMCR has commanded power in terms of pricing. They have been the only ones allowed to produce single cup brewing giving them advantage over the others coffee firms and virtually have enjoyed a monopoly until this point. After this agreement expiry, consumers will have more options to choose from others similar products besides those of GMCR.
GMCR relies heavily on specialty coffee farms for its product line. The small number of specialty farms allows suppliers to charge higher prices to GMCR therefore straining the company finances. Also, weather and climate changes could possibly result in coffee shortages which would damage GMCR’s reputation (Dess, 2012).
The company provides speciality coffee in a simple brewing machine while allowing the consumer to pick from 27 brands and over 200 beverage variety. GMCR is expanding its operation to Canada and Southern California via acquisitions. In order to support these expansions, the company is also opening a new manufacturing facility in California and Virginia ( Management study guide, 2012).
Issues And Challenges Facing the Company
The company also has high dependence on speciality coffee farms to acquire the exact coffee beans necessary to create its coffee blend. Poor crop yields or adverse weather conditions sometimes affect the farming and productivity of these coffee beans. This prevents GMCR from fulfilling inventory levels and customer orders (Dess, 2012).
Opinion and Recommendation
If I could be in a position to advice the company I would ask them to look for more supplier firms which will act as a redundancy in case yields from farms are disappointing. This would help to maintain the customers trust and also the inventory levels. The company should take an advantage of the big monopoly market and use mass media to advertise their products and maintain their customers trust. GMCR should employ more experts and experienced personnel and management to avoid the mistakes in business management and to make the employees accountable for losses.